Opinion
Civil Action No. 3:02-CV-1076-N
March 17, 2004
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Ethan Leder's Motion for Summary Judgment, filed July 17, 2003. Leder argues that summary judgment must be granted, since Plaintiffs' claims were released by stipulation, certain claims are barred by the applicable statutes of limitations, Plaintiffs do not have the perfected priority lien and security interest required for relief, Plainitffs lack standing, and certain claims fail as a matter of law. Because Plaintiffs' claims against Leder were released by a stipulation of settlement signed April 26, 2002, Defendant's Motion for Summary Judgment is granted.
I. FACTUAL BACKGROUND
Plaintiffs invested in promissory notes of Chartwell Healthcare, Inc. and twenty eight of its subsidiaries ("Chartwell") which own and operate nursing homes in Texas, Florida, and Missouri. The notes were secured by guaranteed Medicare and Medicaid receivables. Plaintiffs claim that the Defendants, operating through various corporate entities they control, conspired to plunder Chartwell, stripping its assets and future income stream away, and leaving Plaintiffs with nothing but an empty husk securing their claims. When the Chartwell entities declared bankruptcy in 1998, Plaintiffs' loans were not repaid. Since then, Plaintiffs have commenced a series of lawsuits aimed at recovering their losses.
Among such lawsuits, Plaintiffs filed a February, 2000 cross claim in the bankruptcy case of Chartwell against HCFP Funding, Inc., an entity which subsequently became Heller Healthcare Finance, Inc. ("Heller"). The cross claim alleged, among other things, breach of duty to Plaintiffs as pre-existing lien creditors, tortious interference, and violation of the Texas Securities Act. Plaintiffs alleged that Heller conspired with 22 Acquisition Corporation to convert accounts receivable previously pledged to Plaintiffs. Defendant Leder served as president of Heller and was mentioned by name no less than eight times in the February, 2000 cross claim. The claims against Heller are virtually identical to those now alleged against Defendants. Plaintiffs settled with Heller and the bankruptcy trustees in the Chartwell bankruptcy cases by stipulation dated April 26, 2002 (the "2002 Stipulation"). Under Paragraph 3 of the 2002 Stipulation, Plaintiffs agreed to accept monetary payment,
In full release and satisfaction of all claims of the Noteholders (except only the "Reserved Claims" specified in paragraph 4 hereof[)] arising from or related in any way to the Chartwell Debtors and/or any transaction(s) of the respective Noteholders with any of the Chartwell Debtors, including, without limitation, all claims of the Noteholders asserted or that could have been asserted as proofs of claim, claims for relief, counterclaims, cross-claims, and/or third party claims in the Bankruptcy Cases and/or the Adversary Proceeding (collectively, the "Released Claims") . . .
The "Reserved Claims," carved out of the release in Paragraph 4, set forth four planned actions that would be unaffected by the release: (1) claims against DVI Business Credit Corporation; (2) claims concerning three Missouri nursing homes; (3) claims against Complete Care Services, Inc.; and (4) claims within the Chapter 11 cases of SV/Home Office, Inc. Many of the Reserved Claims were filed by Plaintiffs and are currently pending in the Northern District of Texas. See Asbury v. D VI Business Credit, No. 02-CV-1196 (filed in June, 2002); Barbee v. Esformes, No. 03-CV-1658 (filed as an adversary proceeding in June, 2002); East Texas Noteholders v. Complete Care Servs., Inc., No. 02-CV-1467 (filed in June, 2002). Plaintiffs filed their Complaint against Peter Licari, Frederick H. Ehmann, Steve Fishman, Ethan Leder, and Michael D'Arcangelo ("Defendants") in the instant case on May 21, 2002. Defendant Ethan Leder ("Defendant Leder") filed the instant motion on July 17, 2003.
II. ANALYSIS
Defendant Leder alleges that summary judgment is appropriate because the instant matter is barred by release and satisfaction, the applicable statutes of limitations on certain claims, Plaintiffs' failure to perfect their security interests, and certain claims fail as a matter of law. The Court agrees that Plaintiffs' claims against Leder are barred by the doctrine of release. Accordingly, Defendant's Motion for Summary Judgment is granted.
Texas Courts recognize that a valid release will bar later litigation against a party that it "mentions." See, e.g., Keck, Mahin Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, 20 S.W.3d 692, 698 (Tex. 2000). A release is, at heart, simply a contract. Vera v. North Star Dodge Sales, Inc., 989 S.W.2d 13, 17 (Tex.App.-San Antonio 1998, no pet.) (citing Garcia v. Villarreal, 478 S.W.2d 830, 832 (Tex.Civ.App.-Corpus Christi 1971, no writ)). In the instant matter, the parties have not contested the validity of the release or claimed ambiguity or fraud in its execution. Consequently, the interpretation of the release is to be decided by the Court as a question of law. Mem'l Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d 433, 434 (Tex. 1997) (citing Westwind Exploration v. Homestate Sav. Ass'n, 696 S.W.2d 378, 381 (Tex. 1985)); see also Stinnett v. Colo. Interstate Gas Co., 227 F.3d 247, 254 (5th Cir. 2000) ("The mere fact that lawyers may disagree on the meaning of a contractual provision is not enough to constitute ambiguity.").
In Texas, a broad-form release is given effect, but narrowly interpreted. Keck, Mahin Cate, 20 S.W.3d at 698; Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 422(Tex. 1984). Plaintiffs correctly argue that in order to release a claim, the releasing document must "mention it." Victoria Bank and Trust Co. v. Brady, 811 S.W.2d 931, 938 (Tex. 1991). Indeed, "[a] tortfeasor can claim the protection of a release only if the release refers to him by name or with such descriptive particularity that his identity or his connection with the tortious event is not in doubt." Duncan v. Cessna Aircraft Co., 665 S.W.2d at 420. However, the Texas Supreme Court has made clear that "mention" and "descriptive particularity" do not require specific enumeration in the releasing document. Mem 7 Med. Ctr., 943 S.W.2d at 435. The Fifth Circuit has confirmed that in Texas, "`mentioning' does not require particularized enumeration or detailed description, only that the claim being released come within the express contemplation of the release provision when viewed in context of the contract in which the release provision is contained." Stinnett, 221 F.3d at 255. "Texas law does not proscribe enforcement of such generally-worded release provisions as long as they can be fairly read as `mentioning' the kinds or classes of claims intended to be covered." Id. at 256.
Indeed, Texas courts have consistently rejected the argument that defendants cannot avail themselves of the protection of a release just because they were not specifically identified as parties to that release. In Winkler v. Kirkwood Atrium Office Park, a plaintiff signed a medical release which broadly waived claims against an incorporated health club-identified only as "the Club"-for injuries suffered while participating in athletic programs. Winkler v. Kirkwood Atrium Office Park, 816 S.W.2d 111, 114 (Tex.App. — Houston [14th Dist] 1991, writ denied). The Winkler court held that the release protected the staff members of the health club, explaining that, "[i]n releasing `the Club' from any injuries suffered while participating in the center's programs, it is clear that Winkler intended to release any claim against all individuals and entities involved in the operation, maintenance, and administration of the center." Id.
Similarly, the court in Vera v. North Star Dodge Sales, Inc. interpreted a contract between a consumer and a corporation that included a release that stated, "[e]ndorsement releases North Star Dodge from any and all liability regarding the purchase of a 1993 Mazda Protg JM1B62266PO585288." Vera, 989 S.W.2d at 16. Although the release enumerated only the car dealership with particularity, the Vera court held that the broad release of "all liability regarding the [vehicle] purchase" barred claims against the sales manager and the employee who handled the financing. Id. at 18. In so holding, the court stated,
Any claims Higinio has against Powers and Hall relate to actions taken by them on behalf of North Star Dodge in the sale of the Mazda. The Veras have made no claim against either Powers or Hall for any individual action. In this case, it is clear that, the release of "North Star Dodge" from any liability associated with the sale of the Mazda, also released the North Star Dodge employees associated with that sale. Under the circumstances, the connection of Powers and Hall with North Star Dodge and the sale of the Mazda is apparent. Therefore, the release encompasses Higinio's claims against North Star Dodge as well as his claims against North Star Dodge employees involved in the sale of the Mazda.Id. (citations omitted).
Like Winkler and Vera, the allegations against Defendant Leder fit squarely within the release of Heller contained in the 2002 Stipulation. Plaintiffs agreed that they received the settlement amount,
In full release and satisfaction of all claims of the Noteholders (except only the "Reserved Claims" specified in paragraph 4 hereof[)] arising from or related in any way to the Chartwell Debtors and/or any transaction(s) of the respective Noteholders with any of the Chartwell Debtors, including, without limitation, all claims of the Noteholders asserted or that could have been asserted as proofs of claim, claims for relief, counterclaims, cross-claims, and/or third party claims in the Bankruptcy Cases and/or the Adversary Proceeding (collectively, the "Released Claims"). . . .
There is no doubt that the claims against Defendant Leder "arise from" or "are related to in any way" the Chartwell Debtors. The claims are wholly due to Plaintiffs' investments in Chartwell and arise from the same actions of Defendant Leder alleged in Plaintiffs' cross claim against Heller. Indeed, the complaint against Defendants largely mimics the February, 2000 cross claim that was settled by the 2002 Stipulation. The cross claim raised with particularity the alleged actions of Heller, and mentioned Leder, Heller's president, no less than eight times. Moreover, the claims against Leder "could have been asserted as . . . third party claims in the Bankruptcy Cases and/or the Adversary Proceeding."
Plaintiffs' argument that the 2002 Stipulation does not release Leder relies on an overly narrow reading of the contractual language and applicable law. Although the release provision does not name Leder, the class of claims brought in the Chartwell bankruptcy and released with particularity by Plaintiffs' stipulation are clearly at issue in this lawsuit. In addition, paragraph 4 specifically carves out four "Reserved Claims" from the broad group of claims released by the Stipulation. The people and corporations eventually sued under those reserved claims, like Leder, "were never named as defendants in the adversary proceeding in which the stipulation was entered, and the Plaintiffs have never executed any settlement agreement or release with [any] of them." Plaintiffs' Brief in Opposition to Defendant Leder's Motion for Summary Judgment dated August 22, 2003, at 11-12. Yet the 2002 Stipulation specifically exempted them from the effect of the release. Plaintiffs' interpretation of the contract-that it releases only specifically identified parties-would therefore make the Reserved Claims section redundant. In short, if the release was meant to cover just enumerated parties, the four Reserved Claims would not need to be specifically exempted by a contractual provision. Moreover, if the Stipulation released only identified parties, it would not include as one example of released claims the broad category of third party claims that were, at the time of the agreement, impossible to identify. Adopting Plaintiffs' logic would fail to give effect to the entire contract and would be contrary to Texas law on the topic of release. See Stinnett, 227 F.3d at 255-56.
Contrary to Plaintiffs' repeated suggestion, the claim against Leder is not one of the Reserved Claims identified in the 2002 Stipulation.
In addition, while Plaintiffs argue Duncan requires a release to identify a party only by name or "with descriptive particularity," they omit Duncan's statement that a release is valid in Texas as to a defendant if he is described such that his "connection with the tortious event is not in doubt." Duncan, 665 S.W.2d at 420. Here, the language and issues raised in the February 2000 cross claim against Heller show that Leder's connection with the tortious event, released by the 2002 Stipulation, is not in doubt. In sum, the release of Heller and all claims "arising from or related in any way to the Chartwell Debtors" also released Leder's actions with respect to the Chartwell Debtors. Accordingly, Defendant Leder's Motion for Summary Judgment is granted.
CONCLUSION
Because the claims against Defendant Ethan Leder were released by the 2002 Stipulation and his connection with the tortious events released by the stipulation are not in doubt, Defendant Leder's Motion for Summary Judgment is granted.